It is a bitter truth that these days, quality education is expensive and does not suit the pockets of middle-class people. At this point of time, an education loan comes to the surface.
If we can categorize debt into good debt and bad debt, then an education loan certainly would fall under good debt. Firstly, education loan helps a young student to earn quality education. Secondly, you can earn a stable and lucrative source of income on the basis of a quality education via an education loan.
But as the old cliché goes, ‘Look before you leap,’ one needs to take care of the following points before applying for an education loan.
The Beginning - Look for options
Check out which courses are covered under the Education Loan Category.
Check out which bank offers education loans.
Mostly, all private sector banks offer these kind of loans to deserving students. You can approach any bank of your choice, provided you have the necessary credentials (namely, a confirmation letter from the Institute and a stable academic record). The acceptance letter received from the university or college should clarify all the prescribed points, without any ambiguity. Moreover, the university should be a recognized institution as per the protocols of the University Grants Commission or the All India Council for Technical Education. Once your loan application is approved by the bank, all the requisite fees are paid by the bank to the university directly.
The student stands as the main borrower. You need to mention names of co-applicants while applying for the loan. It could be your parents, brother or sister, or even your spouse.
A third-party guarantor is required in case you are applying for loan between the amounts of Rs.4-7.5 lakhs.
Loans above the amount of Rs.7.5 lakhs are required to furnish with a collateral.
A collateral security is the in the form of moveable (example: fixed deposit) and immoveable (example: non-agricultural land) properties.
Points about Interest rates
Though the interest rates vary from bank to bank, public banks charge relatively lower rates of interest, ranging from 8.5 percent to 10.5 percent.
Public banks charge a fixed amount of processing fees. While in case of private banks, the same fees is between 1-1.5% of the loan sanctioned.
Even though you have read about the information on the internet, confirm all the details once again with the bank officials.
While education loan is certainly useful, the repayment stage requires careful planning. Before your EMIs start, you need to have a repayment strategy in your hands.
It is good that your repayment cycle does not start as soon as the course is completed. You are offered with a cool-down period of 6 months. It is known as moratorium period. Hey, you need to search a job during the period! One important thing to be noted is that this moratorium period is not interest-free. The interest is accrued and calculated, so be careful.
After 6 months of course completion, your repayment cycle starts.
You can utilize smart ways of repaying the loan such as seeking a part-time job while studying, creating a savings schedule, utilizing extra money, automating payments, and consulting with your employer.
Look out for the hidden bank charges such as processing fees, pre-payment penalty, and late repayment of EMIs.
Most of the loan providers charge 0.15 percent of the loan amount as processing fees, you have to double-check with your bank.
Default in repayment
In case you make a default in the repayment, then it can cause an adverse effect on your credit history or on the credit history of the co-applicants.
If you are desirous of going abroad for studying a course, then an insurance is compulsory. These insurance can be travel insurance but mainly your health insurance. Every university in US require a Health Insurance. Your education loan might not pay for this type of insurance and you have to cover it by yourself.
Education loan covers following expenses
a. Exam fees.
b. Library charges.
c. Conveyance and traveling expenses (is studying in a foreign country).
d. All the course completion expenses.
e. Purchase of uniforms, if any.
Following are the three best education loan providers for your instant help.
It is the best solution for all education loans.
It has a specialized education loan website with all the relevant details, as per the convenience of its young, ambitious customers.
Various education loan schemes have been created for the varying needs of the students.
SBI provides 0.5% concession on educational loans to girl students.
In case of pre-payment, one percent reduction in interest rate is offered by SBI.
Students who would like to avail higher studies in India as well as abroad can apply for IDBI education loans.
The interest rate offered by IDBI starts from 9.45% and is floating and reasonable in nature.
Students seeking admission in colleges via management quota can also apply for these loans.
PNB has undoubtedly instilled more faith in the bank customers across India due to its systematic bank operations.
In case of a regular repayment cycle, one is eligible for 0.5% concession in interest rate.
Online application process is also available by PNB for easy loan disbursal.
In conclusion availing an education loan is a reasonable way to gain quality education in India or abroad. Upgrade your CV and enrich your skills with the best available education loans.